< The 2015 All-Europe Research Team
Jaime Vazquez & team
J.P. Morgan Cazenove
First-Place Appearances: 4
Total Appearances: 9
Team Debut: 2000
J.P. Morgan Cazenove’s duo guided by Jaime Vazquez rises from second place to claim its first top finish on this roster since 2010. The Madrid-based analysts earn praise from one investor for being prepared to discuss difficult issues and for their “strong research pieces, like the great sell call on Tesco.” That willingness to deliver tough news has been required over the past year, as the team has grown increasingly bearish on the region’s food and drug retailers. “It remains a sector to avoid until we believe that food inflation comes back,” says Vazquez. He and his teammate remain especially concerned about the U.K. stocks in their universe, reasoning that after years of excessive profitability and rapid capacity growth, the group needs to reset prices and close stores — admittedly painful measures, he concedes. A particularly troubled player in that segment has been Tesco. Britain’s mammoth grocery and general merchandise retailer suffered the highest exposure to structural difficulties in the domestic food market, the analysts advised in late September 2013. As a result, they downgraded the stock from neutral to underweight, at 374p, and reduced their price objective from 390p to 350p. Over the following year they repeatedly warned investors off the stock, restating their negative stance and lowering their target value — to 335p, 285p, 250p, 235p and finally 210p. Then, in September 2014, Tesco management announced a significant overstatement of profits — at least £263 million ($423 million), ultimately — and was compelled to restate earnings. Investors punished the stock, leaving it down 11.6 percent for the day, at 203p, and pushing its total decline to 45.7 percent since J.P. Morgan’s researchers reduced their rating. That was 19.2 percentage points below the European broad market’s return over the period. The next day the analysts repegged Tesco at 185p and then dropped it to 165p in October, which proved to be just above the shares’ 52-week low point of 164.80p, reached in mid-December. By the end of January, Tesco had rebounded to 224.75p, on improving sales.